President Trump signed an executive order on Sept. 13 to end Big Pharma’s corrupt practice of inflating drug prices in American public health plans, the Washington Examiner reported.
“In most markets, the largest buyers pay the lowest prices, but this has not been true for prescription drugs. The Federal Government is the largest payer for prescription drugs in the world, but it pays more than many smaller buyers, including other developed nations,” Trump explained in his argument for the executive order.
The practice of Big Pharma inflating drug prices works like this, explains James Rich of the Washington Examiner, “Assume you have 100 people in the private market and 100 people on Medicare purchasing a drug. If the average free-market price is $5, then pharma makes $1,000 total, that is $500 on private insurance and $500 on Medicare. However, if pharma artificially increases the price to $100, even if only one person with insurance buys the drug, which would be a $400 loss in the private market—every single Medicare reimbursement would equal the new average price of $100, and pharma then makes $10,100 total—a 1,920% increase in revenue.”
The Big Pharma inflates the prices in the “free market” of private medicine so that they can then charge higher prices in the public health plans, which are proportionally more massive than the private insurance plans and thus bring more profit to the Big Pharma. Thus, the same insulin that Americans pay $540 in their country, Mexicans pay $17.
The intent of President Trump’s executive order is precisely to direct the federal government to use prices that are set for the sale of prescription drugs in other countries, which pay substantially less, for Americans who do not have private insurance and depend on public health (Medicare or Medicaid).
“In addition to being unfair, high drug prices in the United States also have serious economic and health consequences for patients in need of treatment. High prices cause Americans to divert too much of their scarce resources to pharmaceutical treatments and away from other productive uses,” the president explained.
He added, “High prices are also a reason many patients skip doses of their medications, take less than the recommended doses, or abandon treatment altogether. The consequences of these behaviors can be severe. For example, patients may develop acute conditions that result in poor clinical outcomes or that require drastic and expensive medical interventions.”
President Trump’s intention to reduce federal spending and help Americans have fairer and better access to medicines still faces a challenge from the Democratic Congress, as the order itself runs counter to the reimbursement mechanism established by law.
The White House estimates that with the implementation of this order prescription drug spending would be 30% or about $43.8 billion annually less from taxpayers’ pockets.